SYDNEY (Reuters) - Australia's biggest department store operator Myer Holdings Ltd said weaker-than-expected pre-Christmas trading would hit first-half profit, the latest in a series of downgrades that sent its shares to a record low.
The warning underscores the challenge facing department store operators around the world to withstand the explosive growth of online shopping led by Amazon.com Inc, which began taking orders in Australia on Dec. 4.
"Trading during the past two weeks has been significantly below our expectations and the year-to-date run-rate," Myer Chief Executive Officer Richard Umbers said in a statement. Profit for the six months through December would be "materially below" a year earlier, it added.
Myer shares fell 10 percent in a flat overall market, hitting a record intraday low of 63.5 Australian cents in morning trading. The shares were issued at A$4.10 in a 2009 listing.
After warning in November that sales for that month were down 2.3 percent, Myer said sales for the first two weeks of December were down 5 percent on the same period a year earlier.
"They're in the firing line from a competition perspective, from an underlying sales perspective, from a demand perspective, from internet risk over the long term, and Amazon's just started," said Lonsec Research equity strategist Danial Moradi.
"I can't see a scenario where they start upgrading earnings, even over the medium term. If retail conditions and disposable income do increase, there's other avenues to spend that money."
WORST PERFORMER
Australia has recorded soft retail sales growth for months as cut-throat competition, relentless price discounts and online competition sap demand for brick-and-mortar shopping. Official figures do not include online sales.
But department stores were the only major retail category to shrink sales in the year to Oct. 30, down 1.1 percent, according to Australian Retailers Association figures reviewed by Reuters.
Australians spent A$23.7 billion online in the year to end-October, 7.6 percent the amount they spent offline, and "online retail sales are still much stronger than the early months of 2017", said National Australia Bank chief economist Alan Oster.
Sales of Myer's nearest rival, David Jones, owned by South Africa's Woolworths Holdings Ltd, fell 5.3 percent in the 20 weeks to Nov. 12.
Myer has begun a five-year turnaround plan which involves ramping up its online offering and shuttering underperforming stores. It currently has 67 locations.
Its biggest shareholder, billionaire retail investor Solomon Lew, has been a vocal critic of the company for months, amid market speculation about a possible takeover. Lew's Premier Investments Ltd took a 10.8 percent stake in March.
Lew said through a spokesman on Thursday that he had warned Myer on Dec. 1 that "there is worse to come".
(Reporting by Byron Kaye and Elouise Fowler; Additional reporting by Ambar Warrick; Editing by Stephen Coates and Christopher Cushing)
